WABASH NATIONAL CORPORATION (NYSE:WNC)
Presented on Dec, 8 2015
Investment Managers
Sashikanth (Sash) Yenika
Siwei (Lerissa) Li
Vanditha M Ravindranath
Agenda

Screening Criteria

Company Introduction

Segment Profiles

Industry Overview

Key Macroeconomic Drivers

Comparable Valuation

Financial Analysis

Financial Projections

DCF Valuation

Technical Analysis

Recommendation
Screening Criteria
Industry – NOT(Energy,
Financials, IT,
Healthcare)
Market Cap < $1B
Current Share Price
< 1.2*52wk low
Piotroski Score > 5
P/BV < 2x
3 Year Avg. Revenue
Growth > 10%
P/E < 15x
Company Introduction

Founded in 1985; 2014 Revenue: $1.86B

Designs, manufactures and markets standard and
customized truck and tank trailers, and related
transportation equipment
WABASH NATIONAL CORPORATION
Commercial Trailer Products
Diversified Products
Composites
Source: Annual report 2014
Aviation
& Truck
Equip.
Tank
Trailer
Retail
Process
Systems
Segment Profile: Commercial Trailer




SALES & GROSS PROFIT MARGINS
2014 Sales: $1.3B
2014 new trailer shipments: 53,550
Portfolio: Dry vans, refrigerated vans, platform
trailers
Industry leader in van and platform trailer
manufacturing
In USD m
9%
8%
7%
6%
5%
4%
3%
2%
1%
-
1,200
1,000
800
600
400
200
2010
2011
PRODUCT MIX
8%
2012
2013
2014
END MARKETS
3%
6%
Dry Vans
9%
1,400
Refrigerated Vans
8%
General Freight Truckload
1%
Refrigerated Freight
2%
Platform Freight
9%
< Truckload Freight
Platforms
80%
74%
Other
Dramatic margin improvement since 2010
Source: Investor Presentation August 2015, November 2015 and Annual reports
Used Trailer Sales
Other
Segment Profile: Diversified Products

SALES & GROSS PROFIT MARGINS
2014 Sales: $0.5B
30%



Higher growth (81% - CAGR 2010-2014 and higher
margin businesses
25%
Portfolio: Sanitary, chemical trailers, aircraft
refueler, vertical silos, portable storage containers
15%
Possess industry leading stainless steel trailer
brands: Walker, Brenner, Bulk
In USD m
500
400
20%
300
200
10%
100
5%
-
2010
2011
PRODUCT MIX
2012
2013
2014
END MARKETS
Food, Dairy & Beverage
Tank Trailers
12%
Process Systems
15%
6%
Chemical
24%
6%
Energy
General Freight
7%
Aviation
53%
20%
5%
Composites
Aviation & Truck
Equipment
8%
22%
10%
12%
Pharma
Parts & Service
Aerodynamic Services
Other
Diverse Products and End Markets
Source: Investor Presentation August 2015, November 2015 and Annual reports
Segment Profile: Retail
SALES & GROSS PROFIT MARGINS

2014 Sales: $0.2B

Dealership model, selling new and used trailers,
aftermarket parts, and maintenance and repair
services
12%
9%
150
Expansion into new markets with mobile service
and third party maintenance
6%
100
3%
50

In USD m
-
2010
PRODUCT MIX
44%
2011
2012
2013
2014
COMPANY-OWNED RETAIL LOCATIONS
9%
47%
200
New Trailers
Parts & Service
Used Trailers
Source: Investor Presentation August 2015, November 2015 and Annual reports
Overview - Truck Trailer Manufacturing
KEY PRODUCTS

Flatbed trailer

Refrigerated trailers

Freight trailers
MAJOR PLAYERS
Wabash National
Corporation
14%
45%
20%
21%
Utility Trailers
Great Dane Limited
Partnership
Other
LIFECYCLE

Mature stage of the industry’s life
cycle

Slight product saturation has been
reached
Source: IBISWorld
OUTLOOK

Trailer with fuel saving technologies for heavy
duty trucks will spur new sales during the
next five years

Industry will face cost pressures from product
development
Porter’s Five Analysis
Rivalry
•High: high price competition, lack of products
differentiation
Bargain Power of
Supplier
•Moderate: volatile price of steel and aluminum
Bargain Power of Buyer
•Moderate: high price competition
Threats of New Entrants
•Moderate: high initial capital cost, limited
access to competitive raw material price
Threats of Substitution
Source: IBISWorld
• Low: no substitute for trailer
Industry Drivers
Key Economics Drivers
•
•
•
Supply Industries
•
•
Aluminum
manufacturing
Iron & Steel
manufacturing
Source: IBISWorld
Price of crude oil
Total trade value
Price of Steel
Demand Industries
Truck Trailer
Manufacturing
•
•
•
Local freight
trucking
Long-distance freight
trucking
Tank & refrigeration
trucking
Economic Drivers
Economic Drivers Growth
30%
YoY % Change
20%
10%
(10%)
(20%)
(30%)
(40%)
(50%)
2014
2015
2016
World Price of Crude Oil
•
•
Source: IBISWorld
2017
2018
Total Trade Value
2019
2020
2021
Price of Steel
Increase in the total trade value will lead to increased demand for
truck trailer manufacturing
Increasing price of steel and crude oil may pose potential threat for
the industry
Demand Industry
Demand Industries Revenue Growth
6%
YoY % Chamge
5%
4%
3%
2%
1%
2016
2017
Local freight trucking
2018
2019
2020
2021
Long distance freight trucking
Tank and refrigeration trucking
•
Source: IBISWorld
Growing demand industries revenue will lead to increased demand
for truck trailer manufacturing industry
Comparable Companies
Provide mechanical, mechatronic and electronic technologies for
braking, stability and transmission automation systems for
commercial truck, bus and trailer manufacturers
Revenue: $2.6B
Market Cap: $5.74B
•
•
Provide axle, brake and suspension solutions to commercial truck,
trailer, bus and coach and off-highway machinery manufacturers
•
•
Revenue: $3.8B
Market Cap: $0.8B
Comparable Valuation
Price/
Company Name
WABCO Holdings Inc.
Meritor, Inc.
Average
Wabash National Corporation
Implied Price per Share
Weight
Ticker
WBC
MTOR
WNC
LTM Earnings
23.8x
13.2x
18.5x
$1.35
$24.92
33.30%
Estimated Price per Share
$24.14
Post 20% discounting – Share Price
$19.31
Source: Bloomberg, Capital IQ, Annual Reports
LTM Sales
2.2x
0.2x
1.2x
$28.02
$33.62
33.30%
EV
LTM EBIT/Share
15.7x
4.9x
10.3x
$1.84
$13.94
33.30%
Activity Ratios & Profitability Ratios
PROFITABILITY RATIOS
ACTIVITY RATIOS
20%
30x
2,000
25x
1,600
-
20x
1,200
15x
10x
800
(20%)
400
5x
2011
2012
Fixed Asset Turnover
2013
A/R Turnover
2014
A/P Turnover
(40%)
2010
Revenue
2011
2012
Gross Profit Margin
2013
2014
Net Profit Margin
The Value of Profit Margin is high due to
the income tax benefit that they received
in 2012
Source: Annual reports 2014, 2013, 2012
Profitability & Leverage Ratios
PROFITABILITY RATIOS
LEVERAGE RATIOS
3
60%
(1x)
45%
2
(2x)
(3x)
30%
1
(4x)
15%
(5x)
-
2011
ROA
2012
ROE (Book Value)
2013
2014
Adjusted Net Margin
The Value of ROE is very high due to the
income tax benefit received in 2012
Adjusted Net Margin is the value of Net
Profit Margin had the tax benefit not been
availed
Source: Annual reports 2014, 2013, 2012
(6x)
2011
Debt/Assets
2012
2013
Debt/Equity
2014
Interest Coverage
DuPont Analysis & Greenblatt Ratios
DUPONT ANALYSIS
2010
118%
NM
(2%)
Tax Burden
Interest Burden
Operating Profit Margin
Asset Turnover
Leverage
ROE
2011
99%
77%
2%
3x
3x
11%
2012
217%
57%
6%
2x
3x
51%
2013
60%
75%
6%
2x
3x
16%
2014
62%
80%
7%
2x
3x
17%
GREENBLATT RATIOS
40%
32%
24%
16%
8%
2011
2012
EBIT/Tangible Asset
Source: Annual reports 2014, 2013, 2012, Ycharts
2013
EBIT/EV
2014
This was considered
as NM as the value
was an outlier
I/S PROJECTION
Source: Annual Reports and Investor update Nov-2015
KEY INPUTS
KEY INPUTS
Source: Yahoo! Finance
WEIGHTED AVERAGE COST OF CAPITAL
DISCOUNTED CASH FLOW
Present Value of Equity
Source: Annual report, industry report
SENSITIVITY ANALYSIS
Technical Analysis
Source: Yahoo! Finance – Dec 7, 2015
RECOMMENDATION
 Expanding Margins
 Increased Share Repurchase
 Strategic Acquisitions
 Entry to diversified growth markets
and less cyclical industries
Stock Price
DCF
Valuation
: $13.63
Current Stock
Price:$11.55
Relative
Valuation:
$19.31
Recommendation:
BUY 500 shares at
Market Price
Target Price:
$14.77
Stock Price
 Global Economic Weakness
 Rise in raw materials & competition
 Stringent Regulations
DIVERSIFICATION OF EXISTING PORTFOLIO
Source: Yahoo! Finance